(Yicai Global) Oct. 12 -- China's central bank has turned to the pledged supplementary lending tool, previously used for shantytown renovation and water conservancy projects, for the first time in more than two and a half years to strengthen economic growth.

The People’s Bank of China released a net of CNY108.2 billion (USD15.1 billion) to the China Development Bank, the Export-Import Bank of China, and the Agricultural Development Bank of China via the program, it said in a statement issued recently.

Policy lenders can apply for PSL from the PBOC by pledging high-grade bond and credit assets. The central bank launched the program in 2014 to increase liquidity in certain sectors.

The PBOC has reactivated PSL to guide financial institutions to strengthen their support to weak links and major fields of the real economy,  Zhou Maohua, a macroeconomy researcher at China Everbright Bank’s department of financial markets, said to Yicai Global. This will help ease fundraising pressures in certain sectors, facilitate effective investing, as well as spur employment and comprehensive consumption effects, the researcher added.

Phased instruments such as PSL can hedge against economic downturn pressures caused by short-term and unexpected factors, Zhou said. But PSL will be phased out when its target is reached, he added.

PSL may be applied to support property developers to complete their unfinished projects because it was earlier used to provide long-term and low-cost funds to rebuild run-down neighborhoods, said Ming Ming, chief economist at Citic Securities.

However, some insiders said PSL may also be used for infrastructure projects. Both options signal further efforts in balancing economic growth, Zhou said, adding that China’s economy is facing the most critical moment of recovery.  

Financial policy will constantly exert its strength this year and it has played a leading role in the process of stabilizing economic growth, Ming said. In light of local government debts, pressures regarding commercial banks’ net interest margins will remain and policy lenders will play significant roles while the value of PSL will probably continue to rise, he added.

The issuance of PSL will play an important boosting role in the process of "loose credit," Ming said. Financial institutions are expected to continue to maintain the stability of loan growth, he added.

Editor: Emmi Laine, Xiao Yi